The US government has said it was suing VW for US$20 billion in civil penalties over the scandal.

Toyota broke GM's decades-long reign as the world's top automaker in 2008 but lost it three years later to the US firm, as Japan's earthquake-tsunami disaster dented production and disrupted the supply chains.

However, in 2012 it once again overtook its Detroit rival and has remained on top since, despite slowing sales in its home market where a weak economy has taken a bite out of demand.

Toyota's overall sales - which include its Daihatsu and Hino brands - edged down 0.8 per cent from a year ago.

Rival Nissan said Wednesday its global sales hit a calendar-year record 5.42 million units, up 2.1 per cent from 2014.

Toyota's upbeat announcement comes despite the firm struggling to recover its reputation for safety after the recall of millions of cars around the world for various problems, including an exploding air bag crisis at supplier Takata.

At least 10 deaths globally and scores of injuries have been linked to the faulty airbags fitted in cars made by some of the world's leading auto giants.

Toyota, maker of the Camry sedan and Prius hybrid, had stopped building new plants for several years, and turned its focus to quality rather than sales volume.

The company is also overhauling its production methods, vowing to slash development costs to try to offset any downturn in the market and squeeze more productivity out of existing plants.

Toyota is pushing further into the fast-growing market for environmentally friendly cars, especially in China where officials are struggling to contain an air pollution crisis.

It has also released its first mass-market hydrogen fuel-cell car, the Mirai, in a bid to tap the green market.

Volkswagen's new chief executive, meanwhile, has said his firm was abandoning its ambition to become the world's biggest carmaker.

"For me, this obsession with unit sales and the ambition to constantly reach new records makes no sense," Matthias Mueller told the weekly WirtschaftsWoche in an interview published in December.

"I'm not going declare sheer size as an end in itself." His predecessor Martin Winterkorn had focused on VW overtaking Toyota as the world's biggest carmaker by 2018.